WASHINGTON, Oct. 15, 2019 (Xinhua) -- International Monetary Fund (IMF) chief economist Gita Gopinath speaks during a press conference in Washington D.C., the United States, on Oct. 15, 2019. The International Monetary Fund (IMF) on Tuesday lowered its global growth forecast for 2019 to 3 percent in the newly-released World Economic Outlook (WEO) report, down 0.2 percentage point from its estimation in July. (Xinhua/Liu Jie/IANS)

The International Monetary Fund observed that India, that is leading some underperforming emerging market economies; may pull down world economic growth in 2020. For the current fiscal year, the IMF also slashed India’s GDP growth to 4.8% from its previous prediction of 6.1%.

This is the biggest cut made for any major country by the IMF for the current year.

IMF’s new observation about the performance of the world economy is added under the update of its ace publication – the World Economic Outlook (WEO).

This years’ report is chiefly authored by the Indian born Chief Economist of the Fund– Ms Gita Gopinath.

With a title ‘Tentative Stabilization, Sluggish Recovery?’, the update sounds a warning that ‘the projected recovery for global growth remains uncertain’.

The matter of concern about the WEO is that the IMF lowered its predicted economic growth of the world economy for the coming three years.

The Fund has slashed world economic growth for by 0.1% for 2020 to 2.9% and similar cut were made for 2020 and 2021.

India- underperforming emerging market economy

The main reason for cutting the growth prediction according to the Fund, is the underperformance of some emerging market economies led by India.

“A more subdued growth forecast for India accounts for the lion’s share of the downward revisions.” – the WEO observes about the weight of India’s poor performance and its reflection in the world economy.

Now, the major factor that caused the cut in world economic growth is India’s deep slowdown. For India, the IMF cut 2019 growth rate from 6.1% to 4.8%.

“The downward revision primarily reflects negative surprises to economic activity in a few emerging market economies, notably India.” – notes the WEO.

As per the IMF projections, China’s economic growth rate will be higher than India’s growth for the next two years.

The IMF is more optimistic about the major performing industrialised economies – the US, China and South Korea. Especially in the context of the trade truce between the US and China, the IMF anticipate some benefits for the world economy.

On the other hand, countries including India, Brazil, South Africa are facing growth problems.

Figure: IMF’s growth projection about the world economy

2019 growth rate 2020 growth rate 2021 growth rate
World Economy 2.9 3.3 3.4
India 4.8 5.8 6.5
China 6.1 6.5 5.8

 

Domestic factors responsible for India’s painful slowdown

According to the Fund, during the third quarter of 2019, growth across emerging market economies (including India, Mexico, and South Africa) was weaker largely due to country-specific shocks coming from domestic demand.

Still, the world economy may pick up some momentum in 2020 according to the Fund.

*********